When more than one person is listed as an owner on title, the owners must decide among them how they want title to pass to someone else should they die. If the owners choose to be Tenants in Common, when one of them dies, that deceased person’s interest in the property passes through their will to the beneficiary named in their will. Those left on title then become owner with that beneficiary or beneficiaries. Tenancy in Common is normally used when the owners are unrelated, or when the respective ownership interests are not equal.
The alternative is to list the owners as Joint Tenants. When title is held in joint tenancy, the owners in joint tenancy hold equal, undivided interests. When an owner in joint tenancy dies, that person’s interest transfers by law to the other person(s) on title in joint tenancy and the deceased person’s interest cannot be transferred to anyone through a will. Joint tenancy is the preferred ownership structure for spouses because when a spouse dies, the survivor becomes the sole owner, and there are no probate taxes payable for the deceased spouse’s interest. In some instances, a parent may consider putting a child or children on title with them as joint tenants. This estate planning tool should be carefully considered as there are some potentially devastating results that could come from such a decision, such as triggering capital gains tax, or creating the risk that the property is subject to a child’s divorce proceedings or becomes an asset available to a child’s creditor should the child be in financial difficulty.
Where there are more than two owners on title, a mix of joint tenacy and tenancy in common could be used. For example when spouses own an interest together with a child, that child could own as a tenant in common with the parents, while the parents could be joint tenants between them.
